Second-quarter results from Chinese electric vehicle start-up
NIO
were worse than expected. The stock wasn’t taking much of a hit in early trading though because the third quarter is looking much better.
That’s a relief for NIO (ticker: NIO) investors. It’s good news for Chinese EV leaders
Tesla
(TSLA) and
BYD
(1211.Hong Kong) too.
NIO on Tuesday reported an adjusted second-quarter loss of 45 cents a share from sales of $1.2 billion. Wall Street was looking for a per-share loss of about 33 cents a share from $1.3 billion in sales, according to Bloomberg.
The loss from estimated aggregated by FactSet was a little bigger at 41 cents a share. Sales estimates were similar. FactSet is an aggregation of five numbers. Bloomberg used nine estimates.
A year ago, NIO reported an adjusted loss of 19 cents a share from $1.5 billion in sales. Sales fell year over year because deliveries are down. NIO delivered about 23,500 units in the second quarter, down from about 25,000 units delivered in the second quarter of 2022.
Gross profit margins for the second quarter came in at about 1%, down from 1.5% in the first quarter.
Shrinking margins, wider-than-expected losses, and lower deliveries aren’t great news. But looking ahead, NIO expects to deliver 55,000 to 57,000 units in the third quarter. Wall Street was looking for closer to 50,000 units.
NIO shares were up initially in early Tuesday trading, but have fallen about 0.9%, while
S&P 500
and
Nasdaq Composite
futures both rose about 0.1%.
Still, it isn’t much of a hit, and third-quarter guidance should help support the stock some on Tuesday. Coming into earnings, investors had a lot of questions about competition, demand, pricing, and the Chinese economy.
NIO answered one question with delivery guidance. It is returning to growth after a relatively weak quarter for sales. Growing deliveries for NIO is also a small positive for overall EV demand in China.
In the first seven months of the year, battery-electric vehicle demand has risen about 25% year over year, according to data aggregated by Citi analyst Jeff Chung. That’s strong, but August sales are set to fall a little year over year.
Falling sales might be why Chinese EV makers, and
Tesla,
have cut prices on some 25 models in August.
Investors will have to keep watching sales numbers from other EV makers as well as NIO to get a sense of how EV demand is looking for the rest of 2023. China is the largest market for new electric vehicles in the world.
Weakening sales and pricing have weighed on NIO stock. Coming into Tuesday trading, shares have fallen 45% over the past 12 months and about 28% over the past month. The
S&P 500,
for comparison, is up about 10% over the past 12 months and off about 4% over the past month.
Shares of Tesla, the largest maker of battery-electric vehicles globally, are off about 11% over the past month. Shares of BYD, the largest maker of battery-electric vehicles in China, are off about 18% over the past months.
NIO management hosts a conference call at 8 a.m. Eastern time to discuss results. Analysts and investors will want to hear more about all the issues impacting shares: deliveries, demand, and the state of the Chinese economy.
Write to Al Root at [email protected]
Read the full article here
